This Small-Cap Stock Has Big-Time Risk Ahead of Earnings

EXPR is up over 30% in 2022

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Express, Inc. (NYSE:EXPR) is slated to report fourth quarter earnings before the open on Wednesday, March 9. EXPR reported earnings of $0.17 per share for its third quarter. Wall Street analysts anticipate that the retailer's EPS (earnings per share) will come in at $0.07 for the upcoming Q4 earnings report.

EXPR also announced last week that the retail brand will participate in the UBS Global Consumer and Retail Conference on Thursday, March 10. Tim Baxter, Chief Executive Officer, and Matt Moellering, President, Chief Operating Officer and Interim Chief Financial Officer, will participate in a fireside chat that will be webcast live.

Express stock has added roughly 64% in the past 12 months, and boasts a year-to-date lead of 31.2%. with solid support emerging at the $4 level and 320-day moving average. however, the stock's $5 level still looms up ahead as a ceiling since the stock broke below here back in late-September. At last check, EXPR was down 9.5% to trade at $4.03. 

expr chart march 7

Short sellers have been piling on the stock ahead of its earnings event, rising 19.9% in the last two reporting periods. The 4.04 million shares sold short make up 6.2% of the stock's available float. 

Express stock is an extremely risky investment from a fundamental point of view. Although EXPR's price-sales ratio of 0.18 indicates a very attractive valuation, the retail company remains unprofitable and has experienced drastic declines in revenues and net income over the past couple of years. Between fiscal 2019 and fiscal 2020, Express' revenues declined 4% and net income decreased by more than $173 million. Express reported $405 million in net losses for fiscal 2021 alone. In addition, with $36.8 million in cash and $902.43 million in total debt on the balance sheet, EXPR offers no long-term assurance for investors.

However, EXPR has started to see a recovery over the past 12 months, with revenues growing 41% and net income increasing by $330 million. The retailer is also estimated to grow revenues 6.3% and to grow earnings by $0.45 per share for fiscal 2022. Still, Express stock simply presents too great of a risk due to their lack of profitability and minimal growth rate.

 

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